A Comment -- General Comments From an Expert (A Commentary)

(Top Pick May 8/09, Up 31%) Trinidad Drilling 7.75% 07/31/2012. Liked the company. Bond was so far out of the money it was trading on their bond value and had no conversion value.

Protecting in an increasing interest rate environment: A laddered bond portfolio does this. 7 portions – 1 year, 2 year, 3 year, etc. and get one seventh of your money back every year to re-invest at higher rates. He put together a corporate, laddered for his clients.

A bond is secured by something real. A debenture is not secured. All Government bonds are actually debentures. ‘Bond’ is also used as a generic term.

Preferred vs. Common: Preference is not to invest in Preferred shares anyway. He suggests bonds and common shares.

Yield curve is a forecaster of growth. 2 Year rate since January has increased about 60 points. This is much more than the longer end. The market has already moved ahead of the Bank of Canada.

Tier 1 bonds from Scotia and TD for the next 10 years for income: They are a good hold. They yield quite a lot more than regular bonds. They are actually capital trust securities. They dump mortgages into these securities. They are little further down on the bank’s balance sheet and attract a higher yield as a result.

Strip Bonds: A fully compounding vehicle with no periodic interest payments to re-invest, good for the RRSP. In a taxable account you would be paying tax on interest you are not receiving.

Greek government is talking through its hat and some who are trying to put together a rescue package are not buying it. Greek debt was downgraded to junk status. This is quite a serious situation for the credit market. There’s going to have to be a write down of some size. His view is that it is not as bad as it looks in Canada. It will be a subdued recovery and inflation is not going to be a problem. The Canadian economy is going to come off the boil and the Bank of Canada does not have to raise rates.

Rates are rising at the banks with Mortgages. Equities will outperform fixed income. Profit growth is coming through now. Valuations are realistic for where we are now. Value is in more defensive or health care names. Banks are still a good long-term prospect. Insurance companies have lagged. She is focused on yields. The biggest risk is significantly higher rates than anticipated.

We are in a credible rally, a bull market. A lot of people still haven’t bought into the rally. Emerging market demand is increasing and one of the best ways to play that is through Canadian resource stocks. Gold is less economically sensitive, so not the best. He is fully invested. Focuses on companies that are growing production or resources.

Investing style. His trades are for income. Make sure you have quality companies that can maintain and grow dividends and distributions. Also have strong balance sheets. Choose businesses that are not too cyclical. Buy on dips with the 1st support around the 50-day moving average and 2nd support around the 200-day moving average.

“Sell in May and go away”? 3 worst months for the market are September, February and May so don't sell in May, sell before May. Sectors he would sell would be high beta sectors, the ones that have no dividends and that have moved hard. You want to lock in a profit.

With a strong CDN$, what ETF in foreign markets would be good? If you believe the Cdn$ would continue to strengthen, one of the things you want to look at is an ETF that Hedges back into the Cdn$. This takes currency risk off of the table. If you think the Cdn$ is probably peaking, then don't worry about the currency hedge. There are a number including iShares and Claymore. You can buy the EFA Australia, Asia and the far east, merging markets or S&P 500 from either of these 2 companies.

US stock purchases? This is a great time to spend the valuable currency. This is what a lot of major corporations and institutional investors do.

(A Top Pick Nov 13/09.) Picton Mahoney Cdn Market Neutral. An authentic long/short hedge fund strategy with Canadian allocation, which is expected to give positive returns no matter where the market goes. Still likes.